EXPORT FUNCTIONS FOR PAKISTAN: A Simultaneous Equations Approach

This paper suggests that the export performance of Pakistan can be well analyzed by considering both supply and demand sides simultaneously. Following Goldstein and Khan (1978) we formulate a simultaneous equations equilibrium model for Pakistan’s exports. Our two-equation model, which is estimated for primary and manufactured goods exports for the period, 1960-80, is directly comparable with the estimated export supply equations reported in P.I.D.E.’s macroeconometric model. The estimation of our model using 2SLS provides consistent estimates of the export elasticities. As expected, Pakistan being a small open economy, price responses are not significant while world income and domestic production of exportable significantly explains the demand and supply sides of exports respectively.